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Ofwat today announced that, subject to consultation, it proposes to increase the price limit of Bournemouth and West Hampshire Water in 2004-05 because of changes to its financial position. The draft decision would allow the company to increase water charges for the remaining year of the current price review period, from 1 April 2004 to 31 March 2005. Under Ofwat's proposed change, the average household water bill for Bournemouth and West Hampshire customers would be £109 in April 2004, an increase of £5 from April 2003. But customers would continue to benefit in real terms from the effect of the price reductions that were introduced in April 2000. After the proposed increase, customers' bills in April 2004, in real terms, would be broadly constant with the level they were five years ago. Director General of Water Services, Philip Fletcher, said: "After looking very closely at the company's claim, we have provisionally concluded that we need to raise its price limit. "I regret the need for an increase, but I have a responsibility to ensure that efficient water companies can finance the services they provide to customers. "I have scrutinised Bournemouth and West Hampshire Water's application fairly and consistently, and I have sought to balance the need to protect customers' interests with the financial requirements of the company." Bournemouth and West Hampshire Water has demonstrated that a reduction in demand for water from what was forecast in 1999 has led to lower revenue which has had a substantial effect on its business. In the company's case the reduction in revenue has been caused mainly by the closure of a number of large business users and lower than assumed consumption by metered customers, not because of the company's inefficiency. Ofwat considers that Bournemouth and West Hampshire Water should be entitled to increase its income in 2004-05 to enable it to restore the level of return and achieve the interest cover in 2004-05 that was forecast in 1999. If this application had not been made, the issues driving this change in price limits would have had to be considered at the 2004 Periodic Review. As a result, this proposed increase to the 2004-05 price limit brings forward the impact of these issues. Any change to the price limit for 2004-05 will be taken into account when Ofwat sets price limits for 2005-10. As Ofwat has previously stated, it will be consulting on changes to this particular licence provision in connection with the coming price review. The consultation on the draft decision runs until 5 February 2004. Ofwat will announce its final decision on 19 February 2004. Notes to Editors: 1. The Director General of Water Services is the economic regulator of the water and sewerage companies in England and Wales. He exercises his powers in a way that he judges will allow them to carry out their functions properly, and finance them. WaterVoice represents customers' interests. 2. Price limits were set on 25 November 1999 for all the water and sewerage companies in England and Wales for the period 2000-05. They came into effect from 1 April 2000. Copies of 'Final Determinations: Future water and sewerage charges 2000-05' are available on the Ofwat website (www.ofwat.gov.uk) and from the Ofwat library (0121 625 1373). 3. The substantial effect clause allows a company to ask the Director to consider whether it is appropriate to raise price limits. For Ofwat to consider the request the company must show that the:
5. Price limits are set using the formula RPI+/-K, where K is the number by which the company can change its charges to customers above - or below - the level of inflation. The price limits for Bournemouth & West Hampshire Water, set at the 1999 Periodic Review and following the interim determination in 2001, are as follows: PRICE LIMITS %
COMPARISON OF AVERAGE BILLS
MEDIA ENQUIRIES TO OFWAT PRESS OFFICE ON: 0121 625 1416/1496/1442 Out of hours enquiries to pager: 08700 555 500 water 503/509. Ofwat publications and press notices can be found on Ofwat's website at: www.ofwat.gov.uk  | ||||||||||||||||||||||||||||||||||||||||
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